In Chile, student-led opposition to the government’s education reform is expected to continue to fuel unrest at least over the coming weeks, with a potential for associated violence and collateral material damage. Thousands of students demonstrated on 5 and 10 July in the capital Santiago and other urban centres to reject the education reform currently being discussed in Congress. Violent clashes were reported in Santiago between the security forces and hooded militants on 5 July, leading to the arrest of around 100 people. No incidents were reported during the 10 July rally. Nevertheless, violent clashes and incidents of vandalism and looting should not be discarded in future demonstrations.
On 6 July Colombia’s FARC’s 200-strong Armando Rios First Front decided not to disarm and demobilise after signing a potential peace deal with the government, marking the first public sign of opposition from within the FARC to abide by the terms of a final peace deal. The FARC’s leadership, who on 5 July ordered all FARC guerrillas to stop demanding so-called ‘revolutionary taxes’, publicly disavowed the statement. Although further opposition from the FARC’s rank and file is expected, it is unlikely to severely affect the peace process. However, it indicates that guerrilla-related security risks will remain a concern in guerrilla stronghold areas.
On 11 July Venezuelan President Nicolas Maduro ordered the seizure of the local plant of US firm Kimberly Clark Corporation days after the company stated it would halt operations due to shortages of raw materials in the crisis-ridden country. Maduro said the government would provide public funds for the plant to continue operating, given that the closure was considered to be illegal. Maduro blamed the company’s decision on an international plot to damage Venezuela. He has recently threatened companies who stop production with expropriation, a risk that will remain high as the economic crisis continues.
Theresa May became the new prime minister of the United Kingdom on 13 June, however, uncertainty will continue to be the leading theme of the coming weeks as the new government settles in and looks to begin negotiations on leaving the European Union. May has yet to indicate when she will trigger Article 50 of the Lisbon Treaty although German Chancellor Angela Merkel has already stated she expects negotiations to be difficult and has specifically warned that the UK will not be able to ‘cherry pick’ those aspects of the union and common market that it hopes to keep. While the proverbial cards remain stacked in the EU’s favour with regards to negotiations – given the size of its market, the two-year time limit on negotiations in Article 50 and the fact that the UK’s exports to the EU are largely in the services industry – other political developments within the bloc may cause a shift in calculations over the coming weeks and months.
The past week also revealed internal EU divisions over responding to Italy’s request to have the state support its banks, which would require either a change in, or an exemption from, the EU’s new bailout rules that require creditors to take losses before taxpayers. Meanwhile, Romania made its own move towards the populist policies ascendant across the EU’s easternmost members, despite having a technocratic government, when President Klaus Iohannis signed into legislation a bill requiring large supermarkets to sell at least 51 per cent Romanian dairy, meat and agricultural goods. As the EU struggles to reach a unified position on Italy’s banks and struggles to tame rising populism, Britain may find itself negotiating with a bloc constrained by its internal divides.
Former Soviet Union
The 8-9 June NATO summit saw the alliance agree its first expansion in over a decade, formally inviting Montenegro to become the bloc’s 29th member. NATO also subsequently held a joint summit with Ukraine, and while Georgia and Moldova were invited as well, none of these countries was even granted the Membership Action Plan (MAP) they have publicly called for. Nevertheless, Russia reacted furiously to plans to deploy rotating NATO forces to Poland and the Baltics and has also announced plans to shift tens of thousands of soldiers to its Western frontier. In a warning that Russia could react even if Sweden and Finland move to join the alliance, the Kremlin also threatened the previous week it would move troops nearer the Finnish border should it seek NATO membership.
Despite the joint summit, however, NATO did not announce any significant support measures for Ukraine other than to stake out its position that it was Ukraine upholding the Minsk peace agreements and lambasting Russia for intervening and supporting separatist forces. Moscow takes the opposite view and no conclusion to the ongoing conflict is in sight. Despite increasing calls by some politicians in the West for sanctions to be loosened, it is increasingly clear that Russian-Western relations will not return to mutually profitable position enjoyed before the Euromaidan revolution in the foreseeable future. And while the EU sanctions regime will remain under threat from politicians within the EU itself, it is Russia’s economy that has suffered the most. The Kremlin, however, finally began its much discussed programme of partially privatising some state-owned firms with the sale of a 10.8 per cent stake in diamond mining giant Alrosa on 11 June. However, it took a 3 per cent discount on the market price to secure the sale and even then some 35 per cent of the shares sold simply went to another Kremlin-owned investment fund. While the planned privatisations of minority stakes in Bashneft, Rosneft and other firms are also increasingly likely to go ahead, they are increasingly unlikely to change calculations that show the first of Russia’s two sovereign wealth funds drying up by the end of 2017.
Middle East and North Africa
Ratings agency Moody’s released a statement saying the United Kingdom’s vote to leave the European Union will have a negligible effect on the Gulf Cooperation Council (GCC) members’ sovereigns’ credit ratings. GCC sovereign wealth funds have limited trade exposure to the UK market, although real estate investments will likely be significantly impacted. In 2015, only 2.7 per cent of the region’s trade was accounted for with the UK. There is a moderate risk of banking sector retrenchment affecting mainly the UAE and Qatar as the impact of the referendum decision is clearer and further impacted by an economic downturn in the region.
Turkey’s ruling Justice and Development Party (AKP) announced the beginning of an overhaul process of parliament’s internal rules, a move claimed by opposition parties as curbing political dissent. The overhaul includes a restriction on the time alotted each political party in parliamentary discussions, and a limit to the number of motions a party can introduce. AKP claims the moves will streamline parliamentary activities, although will instead severely restrict the opposition’s ability to hold the government to account and register dissent for government policies. If passed, the reforms will further cement President Erdogan’s grip on power and significantly limit political dissent. Despite a move towards even greater control by the AKP, there is an increased risk of protests and violent clashes in rural areas of Turkey and possibly its major cities in the coming week as social tensions erupt openly in the wake of street fighting in Beysehir that left one Turk and one Syrian dead when a Syrian reportedly kicked a cat.
On 7 July simmering tensions in South Sudan between troops allied with President Salva Kiir and those loyal to Vice President Riek Machar boiled over as violence erupted in the capital Juba. Over 300 people, including more than 30 civilians, were killed over five days of fighting. Thousands sought shelter in UN and NGO compounds that were also fired upon by soldiers whom Kiir initially appeared to have little control of. Although both leaders have since ordered a ceasefire, there is a high risk of further violence given unruly elements on either side, an absence of trust, and a failure to implement security arrangements.
South African twins were arrested on 10 July were found to be planning attacks on the US Embassy in the capital, Pretoria, as well as on buildings owned by Jewish people. The twins, along with two others, face charges ranging from conspiracy to firearms offences and will be detained until the hearing on 19 July. This follows a warning issued by the US and UK in June 2016 that South Africa faced an increased threat of attacks against foreigners in South Africa’s shopping malls. While there are no known militant groups operating in the country, threats arising from terrorism remain elevated. These are further compounded as the South African economy comes under increasing strain, resulting in an increase in poverty and unemployment.
Foreign companies opening offices in Kenya will be required to cede at least 30 per cent of their shareholding to persons who are Kenyan citizens by birth following the implementation of the Companies Act 2015. Investors failing to comply will be fined US$50,000, however the law does not apply retrospectively. While the new law allows locals to pair up with foreign investors and enjoy dividend earnings, it can also be seen as an interventionist measure preventing efficient business, and brings with it additional uncertainty. The move is also likely to deter foreign investment